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Science and Technology Outlook and Report

Science and Technology
Outlook and Report '95

SCIENCE AND TECHNOLOGY
OUTLOOK AND REPORT

Scientific knowledge is the key to the future. Technology is the engine of economic
growth. Together, science and technology build new businesses, provide good jobs, improve
health and the quality of education, and protect us from threats as diverse as environmental
degradation and military force. These essential tools of modern society open our eyes to new
opportunities and challenges. For example, high technology industries, from computers to
biotechnology, form the cutting edge of our economy, but their lead over tough global
competition is narrow. Information technologies have transformed personal and business
communication, offering immediate benefits but raising important long-term questions about
access and control. The technological superiority of U.S. military forces helped bring about
the collapse of the Soviet Union, an event that diminished the nuclear threat but left
challenging regional instabilities in its wake. Our efforts to probe further into the universe
and look more deeply into the smallest particles of matter instill national pride but often call
for international cooperation in a world seemingly beset by competition and conflict.

BOX: Technology for America's Economic Growth,

The traditional federal role in technology development has been limited to support of
basic science and mission oriented research and development. This strategy was appropriate
for a previous generation but not for today's profound challenges. We must move in a new
direction:

strengthening America's industrial competitiveness and creating jobs;

creating a business environment where technical innovation can flourish and where investment is attracted to new ideas;

ensuring the coordinated management of technology all across the government;

forging a closer working partnership among industry, federal and state governments, workers, and universities;

redirecting the focus of our national efforts toward technologies crucial to today's businesses and a growing economy, such as
information and communication, flexible manufacturing, and environmental technologies; and

reaffirming our commitment to basic science, the foundation on which all technical progress is ultimately built.

(Source: Technology for America's Economic Growth: A New Direction to Build Economic Strength, February 1993)

American mastery of science and technology will largely determine whether our
citizens capture new opportunities -- good jobs, a higher quality of life -- and continue to
enjoy basic amenities, including safe and affordable food and shelter. Innovations in myriad
products and processes Americans count on for a better life, such as heart surgery, computing,
and electric lighting, stem from scientific advances. The investments we make today in basic
and applied research will assure the continuous flow of knowledge needed to develop new
technologies for the future.

The federal government plays a crucial role in ensuring American leadership in
science and technology. The Nation's world leadership in science, mathematics, and
engineering derives from federal sponsorship. Federal research investments led directly to the
technological leadership of U.S. firms in agriculture, aeronautics, semiconductors, computers,
communications, pharmaceuticals, and scores of other critical areas.

Maintaining this leadership requires steady investment. The Administration proposes
$73 billion for all research and development in Fiscal Year 1996, which would constitute
about 40 percent of all U.S. research and development. The public will receive a substantial
return on this investment. While there is much room for uncertainty in measuring the impact
of federal research spending, repeated studies suggest that the payoff to the Nation's economic
welfare is great. The private rate of return on research and development spending -- meaning
the return to the firm performing the research and development -- averages about 20 to 30
percent. But the social rate of return -- including spillovers to other firms and customers -- is
about 50 percent, or twice as high.

The government's indispensable roles in advancing science and technology, include: 1)
ensuring a strong base of fundamental science; 2) educating a scientifically and technically
literate workforce; 3) providing a business environment that encourages innovation and
investment; 4) investing in research and development that is critical to the economic and
social needs of the nation, but cannot attract adequate private support; and 5) encouraging
mutually beneficial international cooperation in science and technology. Science and
technology confer benefits in areas outside the market, e.g., national security, public health,
food safety, education and training, and the environment. Only federal research and
development funding can ensure adequate attention to these key problems.

The federal government, acting for all Americans, can make long-term research
investments where the returns are collectively essential to our country, but distant,
individually uncertain, or difficult for private firms to secure. For example, many decades of
public support for molecular biology, chemistry, and physics laid the foundation for today's
pharmaceutical and biotechnology enterprises which now return billions of dollars to
individual firms and provide many high paying jobs. As another example, our investments in
space technology have led to our strong global position in the commercial launch and satellite
business.

In 1993 this Administration began an intense reexamination of federal research and
development priorities. This review of federal research and development management is an
integral part of the Administration's commitment to make all of government more efficient
and more responsive. The review continues, but we remain convinced that: 1) the Nation's
future depends on advances in science and technology; and 2) federal investment is an
essential catalyst for such advances. We are determined to continue investments in the future
despite fiscal pressures today. Progress toward the Nation's goals and the Administration's
priorities has required significant changes in federal roles and responsibilities in the science
and technology enterprise. Fiscal constraints have necessitated streamlining and some painful
reductions in programs. Substantial improvements in management and the redirection of
scarce resources still leave us with much to accomplish.

This report describes the actions and plans of the Clinton Administration to harness
the power of science and technology. It examines the rationale for federal support of science
and technology. It describes our strategy for using science and technology to meet the
challenges that lie ahead, including several new research and development initiatives and
public/private partnerships. Finally, the report explains the Administration's progress toward
reorganizing the federal science and technology enterprise.

National Goals for Science and Technology

Thoughtful investments in science and technology fuel economic growth, strengthen
national security, and improve the quality of life. This Administration has directed its efforts
toward high priority areas, including:

Economic growth and job creation

Education and training

Environmental quality

Health

Information technology

National security

World leadership and cooperation in science, mathematics and engineering

Success in each area will depend on advances in fundamental science, continuing
technological innovations, and responsible governance.

Scientific knowledge is the key to the future. America's future demands an
expanding knowledge base, which requires investment in our people, institutions, and ideas
and sharing broadly with our global partners. Science lies at the heart of that investment -- it
is an endless and sustainable resource with extraordinary dividends. The nation's commitment
to world leadership in science, engineering, and mathematics created the world's leading
scientific enterprise, whether measured in terms of discoveries, citations, awards and prizes,
advanced education, or contributions to industrial and informational innovation. Our scientific
strength is a treasure we must sustain and build on for the future.

Box: Science in the National Interest

Science provides an endless frontier of inquiry. Advancing that frontier feeds our
sense of adventure and our passion for discovery. The unfolding secrets of nature provide
new knowledge to address crucial challenges, often in unpredictable ways. These include
improving human health, creating breakthrough technologies that lead to new industries and
high quality jobs, meeting our national security needs, protecting and restoring the global
environment, and feeding and providing energy for a growing population. Science is a
critical investment in the national interest, and we have pledged to:

maintain leadership across the frontiers of scientific knowledge;

enhance connections between fundamental research and national goals, such as

stimulate partnerships that promote investments in fundamental science and

engineering and effective use of physical, human, and financial resources;

produce the finest scientists and engineers for the twenty-first century; and

raise scientific and technological literacy of all Americans.

(Source: Science in the National Interest, August 1994)

The United States has refined a system for selecting excellence in ideas, individuals,
and institutions that is extremely competitive and productive. The system cannot always
pinpoint the exact areas or nature of scientific breakthroughs or the timeline to fundamental
discoveries. Over decades, however, it reliably produces discoveries that enrich the lives and
prospects of our citizens and, when transformed to practical, cost-effective products,
reorganize old businesses and create new ones. For example:

Fiber optics was a germ of an idea in an obscure area of basic physics in 1966
but now carry most U.S. long-distance telecommunications.

The Global Positioning System represents a confluence of basic research in
physics, software, communications, and high-speed electronics. First developed
for military purposes, it is now rapidly expanding into commercial markets for
navigation and air safety and monitoring Earth's large scale ecosystems.

Severe weather prediction emerged from the integration of space platforms,
immense computing power, and continued atmospheric science research to help
prevent loss of life and property.

The repaired Hubble Space Telescope opened our eyes to distant galaxies in
the same way the early space program opened our eyes to the wonders of our
fragile planet and solar system. At a fundamental level, the discoveries it
enabled have led to a restructuring of our thoughts about the evolution of the
universe.

Box: El Nino Forecasting Reduces Agricultural Losses

Early forecasts of the dramatic shifts every few years in the timing and intensity of
precipitation patterns associated with El Nino have enabled farmers in several South
American countries to prevent crop losses of hundreds of millions of dollars, keeping food
available and prices from rising sharply. This improved forecasting capability was developed
over the past ten years with research into the causes of El Nino by the United States and
other countries through the International Tropical Ocean-Global Atmospheric Program.

Adverse and fluctuating weather events on a large scale cause billions of dollars in
crop losses and other economic impacts each year. Drought in the Sahara, delayed monsoons
in India, and prolonged dry periods in food-growing and water resource regions create food
and water shortages for large populations. Even in developed countries such as the United
States, events such as the Great Plains droughts of 1988, the Mississippi River floods of 1993,
and the California floods of 1995 cost millions of dollars in damages and crop losses.

El Nino affects weather from Australia to South and Central America, as well as into
the western and southern United States. Although fluctuations in the weather cannot be
prevented, the ability to predict extreme changes months in advance allows for agricultural
yields to be protected by changing crops and planting schedules. Our improved forecasting
ability is sufficiently accurate to also be applied to water resource planning in the
southwestern United States. Water supplies can be protected by adjusting storage and
management practices.

Technology is the engine of economic growth. Over the past 50 years, at least a
quarter of U.S. economic growth -- possibly as much as half -- came from new technology
built upon earlier fundamental discoveries. These advances created millions of good new
jobs, a cleaner environment, better health and longer lives, new opportunities for individuals,
and enrichment of our lives in ways we could not imagine half a century ago.

Traditional factors such as access to natural resources and cheap labor no longer
determine international competitiveness. Instead, the new growth industries are knowledge
based. They depend on the continuous generation of new technological innovations and the
rapid transformation of these new technologies into commercial products the world wants to
buy. This requires a talented and adaptive work force capable of using the latest technologies
and reaching ever-higher levels of productivity.

We can only make educated guesses about which investments will catalyze
revolutionary developments, and we must expect some failures. But if the past is any
predictor, our expectations for an excellent return on our investments are not misplaced. For
instance:

Early investments in ARPANet, the first national computer network, have brought us to the 25th
anniversary of the Internet, a prototype of the Global Information Infrastructure. When it started out,
ARPANet could transmit only 56,000 bits of data per second. Today networks using technology
several generations more advanced routinely transmit 45 million bits a second -- almost a thousand
times faster. The federal government provided a relatively small catalyst (a few tens of millions of dollars
annually) that has been matched several times over by private-sector investment in the Internet.
The federal government deliberately set out to commercialize and privatize the Internet. Today dozens of
companies are investing millions of dollars and competing to provide Internet connections and new
services to the tens of millions of Internet users around the world.

Public investments in biomedical research spawned a multi-faceted biotechnology industry that already
accounts for 100,000 jobs and $8 billion in annual sales. We owe extraordinary advances in agriculture
and in chemical and pharmaceuticals processing, as well as our ability to capture large markets
in health care and other industries, to fundamental research in molecular biology and development of
advanced instrumentation funded by the U.S. government.

Our vision is of long-term economic growth that creates jobs while improving and
sustaining the environment. Reconciling these goals requires an environmental technology
strategy that helps industry shift from waste management to pollution prevention and efficient
resource use. Nationally, it will create economic growth by capturing the rapidly growing
market for clean technologies. Globally, it will help developing countries leap frog directly
into sustainable technologies in many industrial and service sectors.

Box: Technology for a Sustainable Future

A carefully crafted, forward-looking environmental technology strategy, along with a
strong societal commitment to environmental protection, will allow us to move expeditiously
toward sustainable development. An environmental technology strategy should:

assure that the federal regulatory and policy-making apparatus is directed toward
facilitating the development of prevention and monitoring technologies critical to
achieving sustainable development over the long term and balanced with control and
remediation technologies in the near term;

increase the resource efficiencies of our technological infrastructure by adopting a
systems approach that employs the tenets of industrial ecology;

forge public-private and federal-state partnerships directed to advancing the
development, commercialization, and diffusion of environmental technologies;

shorten the cycle time from research and development to commercialization and export
of environmental technologies; and

promote the use of environmentally sound and socially appropriate technologies in
developing nations throughout the world.

(Source: Technology for a Sustainable Future, July 1994)

Responsible government advances science and technology. Government is an
essential actor in making sure science and technology help the Nation reach its goals. Only
the federal government can bring the benefits of science and technology to nonmarket areas,
such as national defense, education and training, environmental quality, global health threats,
or world-class fundamental scientific research. In these areas, a strong government presence
is crucial.

A government role is also vital in promoting, in partnership with the private sector,
those technologies critical to economic growth and to the creation of good jobs that cannot
attract sufficient private investment. We invest government funds, on a cost-shared basis,
where private sector investment is not adequate to the job because of unacceptably high
technical risks, prohibitive cost, long payback horizons, or where the returns cannot be
captured by the investing firm but spill out to competitors, other firms, or society at large.
The social rate of return to research and development investments, where the benefits may
accrue to several firms and to consumers in the form of less costly and higher quality
products, is about twice as high as the average rate of return to private investment.

A regulatory and economic environment favorable to capital formation and private-
sector investment in research and development is also essential to advances in science and
technology. To encourage private investment, the Administration supported and Congress
extended the research and experimentation tax credit in 1993 for 3 years and reduced capital
gains taxes for small businesses. To encourage the formation of alliances for new technology
development, the Administration reduced antitrust barriers to the formation of joint production
ventures. To promote private investment in the national information infrastructure, the
Administration transferred to the private sector a portion of the radio frequency spectrum
previously used by federal agencies and allowed competitive bidding in granting new licenses.

After careful review of the impact on national security and foreign policy interests, the
Administration liberalized controls on the export of computers, telecommunications, and other
technologically sophisticated equipment. This action allowed U.S. industry access to foreign
markets that some have estimated are as large as $30 billion over the next few years without
compromising our security.

Bilateral and multilateral trade agreements have expanded access to foreign markets
for America's high-tech companies. For example, under NAFTA, Mexican tariffs have been
eliminated on 70 percent of U.S. exports in the computer equipment and software sector. The
agreement negotiated at the Uruguay Round of the General Agreement on Tariffs and Trade
provides for unprecedented international agreement on patents, copyrights, trademarks, trade
secrets, and other intellectual property issues. These directly affect the competitiveness of
U.S. high technology companies.